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Clearing out old transactions from Accounts Payable?

We need to clear down the A/R and A/P as there are some very old transactions dating back many years.   We wanted to do one journal entry for everything, but I believe QBO only allows payment to specific customers/suppliers – is there any way around this?  

Best answer 03-29-2018 02:54 PM

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Community Manager

Re: Clearing out old transactions from Accounts Payable?

Clearing old Accounts Receivable (A/R) and Account Payable (A/P) balances can be a little tricky.   We can give you the information you need to get these balances taken care of, however, it would still be best to consult with your accountant to make sure what's best for you and your business.

 

The most efficient way to clear any payables is to pay it off.   Aside from making journal entries, this includes creating a clearing account.  The steps are similar to setting up a bank account in your chart of accounts, but without an opening balance.

 

Once you're ready, you can follow the steps below to clear off those A/P balances:

Create the appropriate journal entry:

1) Click the Plus sign (+), then choose Journal Entry.

2) In the Journal Entry window, change the date if necessary.

3) In the Account Field, choose Creditors from the drop-down list.

4) Enter the amount in the Debit field.

5)Tab to the name field and select the Supplier from the drop-down list.

6) In the next row, choose the off-setting or the clearing account in the Account field.

7) The amount in the Credit field should be equal to the amount in the Debit field.

8) Click Save & Close.

 

Apply the general journal entry to the existing balance:

1) Go to Expenses, and then choose Suppliers at the top.

2) Click on the supplier name, and look for the Bill to pay it.

3) Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entrywill be under the Credits section.

4) Select the Bill and the Journal Entry to link them.

5) Click Save & Close.

11 REPLIES 11
Community Manager

Re: Clearing out old transactions from Accounts Payable?

Clearing old Accounts Receivable (A/R) and Account Payable (A/P) balances can be a little tricky.   We can give you the information you need to get these balances taken care of, however, it would still be best to consult with your accountant to make sure what's best for you and your business.

 

The most efficient way to clear any payables is to pay it off.   Aside from making journal entries, this includes creating a clearing account.  The steps are similar to setting up a bank account in your chart of accounts, but without an opening balance.

 

Once you're ready, you can follow the steps below to clear off those A/P balances:

Create the appropriate journal entry:

1) Click the Plus sign (+), then choose Journal Entry.

2) In the Journal Entry window, change the date if necessary.

3) In the Account Field, choose Creditors from the drop-down list.

4) Enter the amount in the Debit field.

5)Tab to the name field and select the Supplier from the drop-down list.

6) In the next row, choose the off-setting or the clearing account in the Account field.

7) The amount in the Credit field should be equal to the amount in the Debit field.

8) Click Save & Close.

 

Apply the general journal entry to the existing balance:

1) Go to Expenses, and then choose Suppliers at the top.

2) Click on the supplier name, and look for the Bill to pay it.

3) Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entrywill be under the Credits section.

4) Select the Bill and the Journal Entry to link them.

5) Click Save & Close.

Established Member

Re: Clearing out old transactions from Accounts Payable?

How can I do it Desktop?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Good day, Bluewaterbookkeeping66.

 

Let me walk you through in the Desktop version.

 

First, we'll have to create a clearing account. Here's how:

  1. Click Lists, then go to Chart of Accounts.
  2. Click Account, then choose New.
  3. Choose Bank, then click Continue.
  4. Enter a desired name (example: clearing account).
  5. Click Save & Close.

Next, create a journal entry. Here's how:

  1. Click Accountant, then go to Make General Journal Entries.
  2. In the Account field, choose Creditors.
  3. Enter the amount in the Debit field, then choose the supplier in the Name field.
  4. In the next row, choose the clearing account you've created in the Account field. 
  5. Enter the amount in the Credit field, then choose the supplier in the Name field.
  6. Click Save & Close.

Then, here's how to apply the entry to the existing balance:

  1. Click Vendors/Suppliers, then go to Vendor Center/Supplier Center.
  2. Choose the supplier, then look for the bill.
  3. Open the bill, then click Pay Bill.
  4. Click Set Credits, then you'll find the journal entry in the Credits tab.
  5. Choose it, then click Done.
  6. Click Pay Selected Bills.

Follow the steps for clearing out the A/R amount using the same clearing account. 

 

As always, we recommend consulting with your accountant on the best way to handle this.

 

Feel free to reach out to us. While we can't provide an accounting advice, we want to make sure any technical questions you have about the system are answered.

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

What do you do with the balance remaining in the clearing account?  Adjust it to retained earnings?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hi there, MaryFerry.

 

Thank you for getting back to the Community. Allow me to step in and help provide additional information about clearing balances in QuickBooks Online.

 

You can still use the Journal Entry feature to clear balances on your Accounts Payable account in the system. While for the offset account, It would best to seek an expert's advice from an accountant to ensure your books will be correct.

 

If this is for vendors with overpayments, you can use the Credit column for the A/P account. You only use the Debit column instead for the account if this is for a vendor with underpayments.

 

To apply the journal entry to the existing debit/credit, you can use the Pay Bills feature.

 

I'm always here anytime you need additional help concerning the A/P account. The Community will be on a lookout on your response.

Frequent Explorer *

Re: Clearing out old transactions from Accounts Payable?

I'm curious about this too!  What did you end up doing with the balance in the clearing account- adjusting to retained earnings?

Experienced Member

Re: Clearing out old transactions from Accounts Payable?

I went back and adjusted to the original expense account.

Active Member

Re: Clearing out old transactions from Accounts Payable?

How do you clear transactions that look like over payments?

The previous bookkeeper credit a payment larger than the bill amount, so it looks like a refund is due.  It isn't, so I can only assume either other bills were paid by this check that were not entered in QB, or P&I were included in the payment.  It's 5 years later, how to I clear AP and AR?

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hello there, FineCarp.

 

Thanks for joining this thread. Allow me to share some insights on how to clear old transactions from your accounts in QuickBooks Online (QBO).

 

If you wish to clear old transactions from your Accounts Payable (AP)/ Accounts Receivable (AR), you can create a clearing account in your QBO. This account is use to move money from one account to another account.

 

Here's how:

  1. Go to Accounting on the left panel.
  2. Select Chart of Accounts.
  3. On the Chart of Accounts screen, click the New tab.
  4. Choose Cash at bank and in hand an Account Type. You may choose any detail type you want for your clearing account.
  5. Type in the Name for the clearing account.
  6. Make sure you do not type in any amount on the balance before clicking Save and Close.

 

Once done, you can create a Journal Entry and apply the apply the clearing account. You can follow the steps provided below:

 

Here's how to create a Journal Entry (JE):

  1. Click the Plus icon.
  2. Choose Journal Entry.
  3. Add the AR or AP from which you are moving money.
  4. Add the Clearing account.
  5. Click Save.

Now you can apply the JE to the existing balance. Let me share again the steps provided by my colleague above:

  1. Go to Expenses.
  2. Choose Suppliers at the top.
  3. Click on the supplier name, and look for the Bill to pay it.
  4. Click the Make Payment button in the top-right corner. When the Bill Payment window opens, the Journal Entry will be under the Credits section.
  5. Select the Bill and the Journal Entry to link them.
  6. Click Save & Close.

However, I'd still recommend checking with an accountant about this for they can provide recommendations as to what account to use for debit and credit.

 

If there's anything else I can help you with or additional questions about the process of clearing transactions from your accounts, just let me know. I'd be more than happy to assist you further.

Active Member

Re: Clearing out old transactions from Accounts Payable?

Thank you for such detail.  I guess my question is, since there isn't a "bill" to pay, do I create a negative bill to account for the "over payments"?  If so, if I use an expense account, it will make my current P&L expense account a negative.

QuickBooks Team

Re: Clearing out old transactions from Accounts Payable?

Hello there, FineCarp.

 

You have to create a journal entry to offset your A/P account with your Clearing account, so you'll be able to clear the overpayment. Let me walk you through.

 

To create a clearing account, please refer to @Charies_M for the steps.

 

Then, create a journal entry. Here's how:

  1. Click Create (+).
  2. Click Journal Entry.
  3. In the Account column, select Accounts Payable (A/P), enter the overpayment amount in the Credit column.
  4. Click the vendor's name.
  5. In the next line, select the Clearing Account, then enter the same amount in the Debit column.
  6. Click Save.
  7. Locate open transaction and click Make payment apply the journal entry.
  8. Click Save and close.

Feel free to read this article for your reference: How to record a barter transaction.

 

The Community is always here for you if you have questions. Stay in touch.